Federated Department Stores, Inc. (NYSE:FD)(PCX:FD) reported diluted earnings per share of 43 cents for the second quarter of 2004. This includes one-time costs of $59 million, or 20 cents a diluted share, related to the company's repurchase of $273 million of its long- term debt. Excluding these one-time costs, Federated's diluted earnings per share in the quarter would be 63 cents, compared to 64 cents a share in the same period last year, and slightly above the company's prior guidance of 57-62 cents a share for the quarter ended July 31.
For the first half of 2004, Federated reported diluted earnings per share of 96 cents. Excluding costs related to the debt repurchase, diluted earnings per share for the first half of 2004 were $1.16, up 32 percent compared to 88 cents for the same period last year.
Terry J. Lundgren, Federated's chairman, president and chief executive officer, said the company was pleased with its strong start for the year and expects that strength to continue into the fall season.
Federated is projecting an increase in same-store sales of 1.5 to 3 percent in the latter half of the year, contributing to a forecasted annual same-store sales increase of 3 to 4 percent in 2004.
The company's earnings for the second half of 2004 are expected to be 35-40 cents a share in the third quarter and $2.45 to $2.55 a share in the fourth quarter. Fiscal 2004 earnings now are anticipated to be $3.70 to $3.80 a share, including the one-time cost associated with the second-quarter debt repurchase. On that basis, Federated's prior annual guidance was $3.60 to $3.70 a share.
Sales of $3.548 billion for the second quarter of 2004 were up 3.3 percent over sales of $3.434 billion in the same period last year. On a same-store basis, Federated's second quarter sales were also up 3.3 percent.
For the year to date, Federated's sales totaled $7.065 billion, an increase of 5.1 percent over sales of $6.725 billion in the same period last year. On a same-store basis, Federated's first-half sales were up 5.0 percent.
New stores opened in the second quarter included a Macy's department store in Antioch, CA, and a Bloomingdale's furniture clearance store in Mt. Pleasant, NY. Four stores closed in the quarter: the Lazarus-Macy's department store in downtown Columbus, OH; two Burdines-Macy's department stores, one in The Gardens in West Palm Beach, FL, and the other in Boynton Beach, FL; and a Bloomingdale's furniture clearance store in South Brunswick, NJ.
Federated's operating income totaled $245 million or 6.9 percent of sales for the quarter ended July 31, 2004, compared to operating income of $264 million or 7.7 percent of sales for the comparable period last year. The company's operating income for the first half of 2004 was $462 million or 6.5 percent of sales, compared to $410 million or 6.1 percent of sales in the same period of 2003.
Federated's operating income includes store closing, centralization and consolidation costs of $31 million in the second quarter this year, compared to $10 million for the same period last year. On a year-to-date basis, store closing, centralization and consolidation costs amounted to $50 million this year, compared to $18 million for the same period last year.
Cash flow from operating activities was $490 million in the first half of 2004, compared to $719 million in the same period last year. Last year's cash flow from operating activities benefited from lower income tax payments, which reflected the use of Fingerhut net operating losses. After first-half investing activities of $185 million this year and $181 million last year, cash flow before financing activities was $305 million compared to $538 million in the same period last year.
The company used $273 million to repurchase 78 percent of its 8.5 percent Senior Notes due 2010 and approximately $263 million to repurchase 5.5 million shares of Federated common stock in the second quarter.
Federated, with corporate offices in Cincinnati and New York, is one of the nation's leading department store retailers, with annual sales of more than $15.2 billion. Federated operates more than 450 stores in 34 states, Guam and Puerto Rico under the names of Macy's, Bloomingdale's, Bon-Macy's, Burdines-Macy's, Goldsmith's-Macy's, Lazarus-Macy's and Rich's-Macy's. The company also operates macys.com and Bloomingdale's By Mail. www.fds.com
This release contains certain forward-looking statements that reflect current views of the financial performance and future events of Federated. The words "expect," "plan," "think," "believe" and other similar expressions identify forward-looking statements. Any such forward-looking statements are subject to risks and uncertainties. Future results of the operations of Federated could differ materially from historical results or current expectations because of a variety of factors that affect the company, including transaction costs associated with the renovation, conversion and transitioning of company retail stores in regional markets; the outcome and timing of sales and leasing in conjunction with the disposition of company retail store properties; the retention, reintegration and transitioning of displaced company employees; competitive pressures from department and specialty stores, general merchandise stores, manufacturers' outlets, off-price and discount stores, and all other retail channels; and general consumer-spending levels, including the impact of the availability and level of consumer debt, and the effects of weather and other factors identified in documents filed by the company with the SEC.
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